Tilley: Consumer Spending & Manufacturing Showing Weakness

The City Wire’s Michael Tilley joined me on this week’s edition of Talk Business Arkansas.

We discussed Wal-Mart’s latest earnings report, which showed consumers pulling back in the present and possibly the future. We also discussed the state of Arkansas’ manufacturing workforce and efforts to revive the struggling sector despite improving numbers in surrounding states.

Wal-Mart posted quarterly revenues of $116.95 billion and net income of $4.07 billion in its second quarter, but the retail giant warned that “the retail environment was challenging” across all of its markets.

Tilley noted that Wal-Mart’s caution was seen in many retailers’ reports.

“A lot of these retailers are reporting a consumer who is pulling back, especially on the non-essential spending,” Tilley said. “When 20% of retail sales are accounted for at Wal-Mart – for them to lower their guidance, for them to suggest the consumer is going to continue to pull back – that’s not the good sign you want for the U.S. economy.”

Indeed, Wal-Mart sliced its net sales growth guidance from 5-6% to 2-3% for the rest of the fiscal year.

The Bentonville-based retail giant also confirmed last week to The City Wire that it would be leading a manufacturing summit in Orlando, Florida that many state and national business leaders planned to attend, including Arkansas Gov. Mike Beebe (D).

The conference is part of Wal-Mart’s effort to “onshore,” or bring back to the U.S. as much as $500 billion in overseas manufacturing.

“It’s the start, it’s not the end game. Wal-Mart said this is the beginning of their onshoring effort,” said Tilley.

Arkansas has been hit hard by manufacturing job losses. On Monday, new workforce statistics showed manufacturing jobs in Arkansas during July totaled 153,900, down from the 154,400 in June and below the 155,800 in July 2012. Employment in the manufacturing sector fell in 2012 to levels not seen since early 1968. Peak employment in the sector was 247,300 in February 1995.

The numbers are a bit puzzling as many southern states have seen a strong manufacturing rebound in the past three years.

“Of Arkansas’ neighboring states, it’s only Arkansas and Mississippi that have seen manufacturing job losses since 2010. The rest of the states have seen manufacturing job increases,” Tilley noted.

He said state and local economic development officials offer a number of reasons for the troubling Arkansas numbers, including tax policy, workforce availability and training, and productivity gains.